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Even the Fed’s Lowball Inflation Measure Goes WOOSH: Fodder for 50-Basis-Point Rate Hike in March

Even the Fed’s Lowball Inflation Measure Goes WOOSH: Fodder for 50-Basis-Point Rate Hike in March

The most reckless Fed ever is still just watching – and fueling – the consequences of 23 months of policy errors as the Inflation Monster gets bigger and bigger.

The Fed’s official yardstick for inflation, the “core PCE” price index, which excludes food and energy and is the lowest lowball inflation measure the US government produces and which understates actual inflation more than any other inflation measure, spiked by another 0.5% in January from December, and by 5.2% year-over-year, the worst inflation spike since April 1983, according to the Bureau of Economic Analysis today.

The Fed’s official and inexplicable inflation target is 2%, as measured by this lowest lowball inflation measure. And now even this lowball measure is 2.6 times the Fed’s target:

But back in 1982 and 1983, inflation was on the way down; now inflation is spiking to high heaven. Back in 1982 and 1983, the Fed’s policy rates were over 10%; now they’re near 0%.

Several Fed governors have put a 50-basis-point rate hike on the table for the March meeting. Yesterday it was Federal Reserve Board Governor Christopher Waller who said that “a strong case can be made for a 50-basis-point hike in March” if we get hot readings for today’s core PCE index, and the jobs report and CPI in early March. The first of the three conditions has now been met with panache.

“In this state of the world, front-loading a 50-point hike would help convey the Committee’s determination to address high inflation, about which there should be no question,” he said in his speech.

The overall PCE price index, which includes food and energy, spiked by 0.6% in January from December, and by 6.1% year-over-year, the worst reading since February 1982.

…click on the above link to read the rest of the article…

Fed Cut Back on Helicopter Money for Wall Street & the Wealthy

Fed Cut Back on Helicopter Money for Wall Street & the Wealthy

Tapered QE-4 Further, Still Hasn’t Bought Junk Bonds or ETFs, Was Just Jawboning.

Total assets on the Fed’s balance sheet rose by $205 billion during the week ending April 22, to $6.57 trillion. Since the week ending March 11, when the bailout of the Everything Bubble and its holders began, the Fed has printed $2.26 trillion.

But the $205 billion increase was the smallest increase since the mega-bailout began with its Sunday March 15 announcement. The Fed is tapering its purchases of Treasury securities and mortgage-backed securities (MBS). Repurchase agreements (repos) are falling into disuse. Lending to Special Purposes Vehicles (SPVs) has leveled off. And foreign central bank liquidity swaps, after having spiked initially, only ticked up by a small-ish amount.

The sharply reduced increases confirm that the Fed is following its various announcements over the past two years that during the next crisis – namely now – it would front-load the bailout QE and after the initial blast would then taper it out of existence, rather than let it drag out for years.

This concept was further confirmed by Fed Chair Jerome Powell on April 10 when he said that the Fed would pack away its emergency tools when “private markets and institutions are once again able to perform their vital functions of channeling credit and supporting economic growth.”

Overall, the Fed has cut the big QE purchases by 65% since the peak week (week ending April 1, $586 billion), to $205 billion:

Purchases of Treasury securities get slashed.

The Fed added $120 billion of Treasury securities to its balance sheet, the smallest amount since this began, down 67% from the $362 billion it had added during the peak week:

…click on the above link to read the rest of the article…

The Brick & Mortar Retail Meltdown, February Update

The Brick & Mortar Retail Meltdown, February Update

And private equity is all over it.

The brick-and-mortar retail meltdown – despite protestations to the contrary – continues with a mechanistic air of inevitability. This started in 2015, took off in 2016, and picked up pace and magnitude in 2017, a progression I documented along the way. Now in 2018, there has been a brutal January and here’s the even more brutal February.

Bon-Ton Stores filed for Chapter 11 bankruptcy on February 4. The filing by the regional department store chain based in Pennsylvania was the largest bankruptcy filing by a retailer in 2018. It had been discussing with its creditors a restructuring of its debts, but that had turned out to be fruitless.

This was a surprise to no one. In September, the company hired bankruptcy advisers to deal with nearly $1 billion in debt. In December, it defaulted on an interest payment. In January, after the 30-day grace period, it announced it had entered into forbearance agreements with some of its lenders. Over the make-or-break holiday selling period, sales fell 4.2%. On February 1, it announced more details on a new wave of store closings, involving 42 of its 260 stores. Liquidation sales in those stores began on February 1. Its shares are in the process of becoming worthless.

Bi-Lo is preparing to file for bankruptcy as soon as March and shutter nearly 200 stores, Bloomberg reported on February 16. The company, which owns the Winn Dixie, Harveys, Fresco y Mas, and Bi-Low supermarkets, is buckling under $1 billion of debt. About 50,000 jobs could be affected.

The low-margin supermarket business has entered a period of major upheaval – not from online competition which hasn’t taken off yet in the US, but from competitors with deep pockets that are barreling into the stagnating market, including the expansion plans of German deep-discounter Aldi, and the moves by the likes of Walmart and Target.

…click on the above link to read the rest of the article…

This is What’s Cannibalizing the US Economy

This is What’s Cannibalizing the US Economy

The sector is booming, but it’s a costly boom.

In the sluggish US economy, the goods-producing sector has been in decline since late 2014, but sales in its biggest sub-sector are booming: medicines.

Drugs are a physically small part of the goods-producing economy. But in terms of dollars, they’re the elephant in the room: According to the wholesales report by the Commerce Department, total drug sales by manufacturers to pharmacies, hospitals, and others in the distribution chain jumped 11.3% from a year ago (not seasonally adjusted) to $54.3 billion.

That was the largest of the wholesale categories in the report: larger than “Groceries” ($51.5 billion), “Electrical” ($45.0 billion),”Petroleum” ($43.4 billion), and Automotive ($36 billion). Drug sales accounted for 12.2% of total wholesales. For the last 12 months, it was 12.0%.

In May a year ago, manufacturers sold $48.8 billion in drugs, or 11.3% of total wholesales. In May 2014, drugs accounted for 9.4% of total wholesales. In May 2013, it was 9.1%. In May 2012, it was 8.8%.

You get the idea. Drug sales at the wholesale level account for an ever larger portion of total wholesales.

Total wholesales rose 0.3% in May year over year. Without the $5.5 billion increase in sales of drugs, total wholesales would have fallen 0.9% year-over-year.

Are Americans really consuming that much more in pharmaceutical products? Hardly: According to the Producer Price Index, prices charged by manufacturers of pharmaceutical products jumped 9.8% in May from a year ago.

So the Wall Street Journal reviewed corporate filings and conference-call transcripts of the 20 largest members of Big Pharma in the US and found that over two-thirds had attributed their sales increases in the first quarter at least in part to jacking up prices. Among them:

Pfizer disclosed that price increases (and in some cases, higher volume of prescriptions) pushed up revenues for nine drugs that together reached $2 billion in the US.

…click on the above link to read the rest of the article…

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